China dominates with seven of top ten largest VC deals in Asia in Q4’23, KPMG analysis finds

EV sector demonstrates growth potential in VC investment despite soft global sentiment

01 February 2024

2 min read

01 February 2024, Hong Kong (SAR), China ("Hong Kong") – Both VC investment and the total number of VC deals in the Asia-Pacific region pulled back during 2023, China accounted seven of the largest ten deals in Asia including a USD 2 billion funding round in Q4’23. The electronic vehicle (EV) sector has seen a significant amount of activity over the last eighteen months, according to KPMG analysis.

In Q4’23, VC-backed companies in Asia raised USD 18.8 billion across 2,390 deals, according to the latest KPMG’s Venture Pulse Q4 2023 report. Priority sectors in China continued to attract large funding rounds in Q4’23, including a USD 2 billion raise by semiconductor start-up Changxin Xinqiao, a USD 274 million raise by cleantech company HuaSun Energy, and a USD 149 million raise by AI and autonomous driving company Didi Autonomous Driving. Sector-specific applications of AI also garnered some interest during Q4’23, although most companies focused on these kinds of offerings are still very early-stage.

Egidio Zarrella, Partner, Clients and Innovation, KPMG China, says:

While there is still liquidity in the VC market, there’s a lot of cash sitting on the sidelines looking to wait the current global and macroeconomic uncertainties out. There are still good deals to be had here in Asia, VC investors are becoming a lot more selective with their money rather than chasing potential deals like they may have done in the past. This likely isn’t going to change much heading into Q1’24.

The electric vehicle sector in China has seen a significant amount of activity over the last eighteen months. Many of these companies, particularly EV OEMs, are now looking to grow both regionally and internationally. While Southeast Asia has been a major target of these growth efforts, with companies offering a number of ecosystem activities (e.g., charging, leasing), Europe and Mexico have also seen targeted activities by China-based EV companies as well.

Zoe Shi, Partner, KPMG China, says:

China is a strong leader in the Electric Vehicles space, which has made it one of the most resilient sectors of VC investment here. A number of big OEMs are working to expand their business in a lot of different places — including Southeast Asia. Given some of these markets are relatively small, these companies are really focused on providing integrated offerings —providing everything from charging and leasing to sales in an effort to really develop the EV ecosystem in different markets.

While VC investment has been very quiet in both China and Hong Kong, recent developments could help make cross border solutions more viable and so more attractive to VC investors. During 2023, China and Hong Kong announced a new pilot program focused on the enabling easier cross-border data sharing; the initial pilot project will focus on information sharing within the banking and healthcare sectors between Hong Kong and the Greater Bay Area.

In Hong Kong, Fintech continued to be a key focus for the government throughout 2023. In August, the Hong Kong Monetary Authority (HKMA) released a Fintech Promotion Roadmap aimed at smoothing the path towards greater digitalization across the industry. The HKMA followed the release of the roadmap with a competition focused on green fintechs — the winners of which were announced at an HKMA-sponsored Green and Sustainable Banking Conference in December.

Irene Chu, Partner, Head of New Economy and Life Sciences, Hong Kong SAR, KPMG China, says:

The HKMA is committed to driving fintech adoption across the banking securities and insurance sectors. There’s a strong push to see banks fully digitizing their operations by 2025, tech and greentech using AI and blockchain technologies. These should all help strengthen activity in the VC market over time. The new data sharing pilot between Hong Kong and China could also be beneficial long-term.

The fundraising cycle concluded 2023 on a muted note. However, deal count in Asia is expected to tick up to a level closer to 3,000 once undisclosed activity is unearthed. The declining in domestic VC cycle could reverse, as foreign investors retreat due to intensifying geopolitical tensions, and firms spot an opportunity to form venture funds within the region.

-Ends-

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